by Samuel Indyk

LONDON (Reuters) – Britain’s NatWest bank said it now expects a 50 basis point hike in the U.S. Federal Reserve’s (Fed) key rates in March following the release of the inflation index on Friday. PCE for the month of January in the United States.

After the rate hike decided at the March 21 and 22 meeting, the Fed is then expected to raise its rates by 25 points in May and June, which would bring the “fed funds” target to 5, 75%, compared to a terminal rate of 5.25% previously, added NatWest.

“Given the inflation data (released on Friday) and the fact that our monthly core inflation profile now shows that the Fed’s preferred core PCE deflator will hold above 4% yoy until ‘In July, we are raising our forecast for the final federal funds rate to 5.75%,’ wrote in a note published Friday Kevin Cummins, chief economist at NatWest Markets.

While the Fed had decided at the end of its meeting on January 31 and February 1 to raise the “fed funds” rate by only a quarter of a point, in particular due to data showing a slowdown in inflation, the indicators published since this decision now calls for an acceleration in the cost of credit.

In the United States, the labor market remains tight, consumer prices are generally stable, producer prices are on the rise and the PCE price index, the inflation measure favored by the Fed, is even showing a unexpected acceleration. All this prompted the markets to anticipate further rate hikes in the United States and to rule out a possible fall at the end of the year.

According to data from Refinitiv, money markets are now pricing in a terminal federal funds rate of around 5.4% by the Fed’s July meeting, down from a rate peak at 5.2% just a year ago. two weeks.

Goldman Sachs said on February 17 it expected three rate hikes from the Fed this year, instead of two, after a series of macroeconomic statistics in the United States.

(Samuel Indyk report, Claude Chendjou, edited by Matthieu Protard)

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